The Expert Podcast

With permission, we've been allowed to talk about a mediation case that's a good example of what might be a solution for a relatively small dispute. This case had to do with a car dealership and a vehicle owner who were in a dispute over the repairs on a vehicle. The customer had purchased a vehicle from a dealership, and it was relatively new. It was about two or three years old and had relatively low miles—about 35,000 to 36,000 miles—when they bought it. They drove it for about two or three months, and it started to have some pretty significant electrical problems.

Now, this vehicle was under a factory warranty, but the factory warranty was five years or 60,000 miles for the engine and powertrain. However, it was only three years or 36,000 miles for other items like electrical shocks, brakes, and all the other components. So, this vehicle was just outside of the warranty for the bumper-to-bumper coverage. It was still under the powertrain warranty, but not the bumper-to-bumper. The problem with the vehicle was that it was having fuel injector problems, where the fuel injector electrical system was not firing properly. It was running rough and stalling—it just wasn't working. So, they brought it to the dealership where they had purchased it, which happened to be the same brand of vehicle. The dealership gave them an estimate of $2,800 to fix the problem.

They said, "Look, we just bought this car four months ago, and now you're hitting us up for almost three grand to fix it. This isn't fair." But the dealership replied that it was out of warranty, and there was nothing they could do. They were in a dispute with the dealership and talked about filing a lawsuit or filing a complaint with the licensing board for dealerships in that state. The dealership wanted to do something but was restricted by the warranty terms; they couldn't just pay for something outside of warranty. A colleague of the vehicle owner suggested mediation. The mediation cost them about $380, with the dealership agreeing to pay $200, and the vehicle owner paying $180.

As a mediating firm, we looked at the case. We reviewed the warranty, the repair bills, the estimate, and the contracts. We talked to the vehicle owner and pointed out some things to both parties. Both parties wanted to come to a solution. The dealership didn’t want to get sued, and they didn’t want an unhappy customer. The customer just didn’t want to pay $3,000, and we found this out by talking to the customer individually. The dealership would never have gotten this information otherwise. The customer said, "Look, I know when you buy a used car, there's some risk. Things might go wrong, but I just didn’t expect it would be this much."

Right there, there’s the answer. The answer isn’t "I have a free car, and nothing goes wrong with it" under full warranty. The answer was that if I drove it for a year and something happened, and it only cost a couple hundred dollars, I would expect that. But I drove it for four months, and it needs $3,000 worth of repairs.

We then talked to the dealership separately. They said, "Look, we understand, and we want to stand behind our vehicles. We checked out the car, and the fuel injectors were working fine before it left the lot. Here’s our copy of the inspection report and the evaluation we did before we sold it." So, they had operated in good faith. They didn’t just sell the car without evaluating or diagnosing it. The dealership said, "We’d like to try to warranty it, but the factory won’t cover it because it’s outside the mileage limit." They had some common ground too, and they felt for the customer, but the repair amount was just too high.

Right away, the parties were getting closer together. In looking at the reports, we also found that there was a code that had been repaired on the vehicle's computer for the emission system, where the oxygen sensor (O2 sensor) had malfunctioned, and the code was resetting. The dealership had fixed it at a cost of a couple hundred dollars before selling the car. We researched this, and we found that the O2 sensor might have had something to do with the fuel injection system. It was a bit of a stretch—it wasn’t an exact connection, but it seemed plausible.

So, we had their service manager contact the warranty claims department of the manufacturer and explain the situation. They told them, "Look, we have this vehicle, technically out of warranty, but when we fixed the O2 sensor, it was still within warranty, with just 35,000 miles on it. We fixed the O2 sensor, and we think the fuel injection system was part of the problem back then, but it just wasn’t diagnosed. We want to warranty it after the fact." Normally, they have to do this within 90 days, but this case was four months old. The warranty department said, "It’s a gray area, but we’re willing to pay some of it. We’ll cover the parts, which are around $800."

At this point, the total cost of the repair was $2,800, but with the manufacturer covering $800, the remaining balance was $2,000. The dealership said, "Look, we’re willing to kick in some of the labor cost." We also pointed out that in four months, the vehicle had been driven almost 10,000 miles—not just short trips back and forth to work, but quite a bit of usage. So, the dealership recognized they had some liability here as well.

Ultimately, the solution was that the manufacturer paid $800 for the parts, the dealership kicked in $1,000 for the labor, and the customer paid $700. You might think, "Well, that still leaves a short $300." But they found a way to do the repair with less labor—by saving three hours of labor at $100 per hour, they were able to cut costs. So, the customer came out of pocket for $700, which they were happy with. The dealership came out of pocket for $1,000, which they weren’t thrilled about since technically, it was out of warranty. But in the end, the problem was resolved without anyone needing to go to court.

The only reason this happened is because a third party, a mediator, looked at all the stakeholders and found their common ground. The mediator identified what both parties already agreed on and put those things together to come up with a solution. The parties wouldn’t have been able to do this on their own because we all have egos. We want to be right, and we don’t want to admit something. The dealership didn’t want to acknowledge that they were willing to do something because they were afraid it could be seen as taking advantage of them. The customer didn’t want to acknowledge that they understood there might be repairs because they were worried about admitting it to the dealer.

A third-party mediator is a good option to look at the big picture and find things that people can agree on, then put those things together. This way, you’re only solving the gap—you’re addressing the difference between the parties. The mediator also provides a fresh face to the conversation, keeping adversarial feelings from escalating and ensuring the problem is solved.